Bigger piece of pie on the backs of taxpayers
The Kansas Bankers Association is trying to pressure the Kansas Legislature to gamble with an existing, proven and fair mortgage service fee that meets the needs of Kansas counties.
Potentially at stake is a $47 million price tag that would be absorbed by every property owner across the state.
The plan would transfer mortgage filing service fees away from liable filers and onto property owners at-large in the form of a subsidized property tax.
If approved, counties will have little choice but to adopt and implement the same funding mechanism that supports the operation of county government and its services.
If the current service fee were eliminated, all 105 Kansas counties would be compelled to increase their mill levies to make up for the substantial loss. Currently, the fee is equal to about 1 property tax mill's worth of revenue, or 0.26 percent of the principle borrowed for real estate.
It is not going to sit well when all property owners regardless of their own economic situation will be mandated to subsidize their neighbor's mortgage service filing fees. It is really a question of fair treatment and accountability.
Basically, under the new proposal, anyone that takes out a mortgage or refinances their property will now be passing the fee onto everyone else.
Currently, the mortgage registration service fee is a one-time payment to the county, whereas a mill levy tax remains in place as long as the county desires to keep it in place. The mill levy increase could remain in place for many years and eventually end up costing the mortgage filer more money than had they just paid their one-time fee to initially file.
Changing the existing system could have further unintended consequences during an unpredictable economy.
Under a mill levy taxing method, collections are not based on filed mortgages, but on "anticipation of county need requirements," which may never correspond to actual mortgage filings. The potential of a "hidden" property tax increase could be immediately buried in the mill levy even if unintended.
The current service filing fee method corresponds precisely to the mortgage transactions generated. (The more mortgages filed equals the more revenue collected.) There is never an over-taxation or under-collection.
Proponents of the elimination of the mortgage registration fee contend the current system is an obstacle in border counties, because the purchaser of residential or commercial real estate in another state doesn't face the mortgage registration cost imposed on the Kansas buyer.
Kansas does not stand alone with the current equitable service fee collection method.
The KBA also takes issue with the Farm Credit banks whose customers receive a waiver from the mortgage registration fee. In spite of their contention, the Kansas Legislature cannot change federally granted exemptions benefiting Farm Credit banking customers.
As an agricultural state, the Farm Credit mortgage fee waivers were put into place to assist Kansas farmers who refinance as a regular facet of operating and maintaining their farm and equipment. Waivers were not intended for large-scale mortgage financing or refinancing of urban residences.
Mortgage registration service filing fees are not paid by either the realtors or non-farm credit banks. The fees are currently paid by the filers of the mortgage transaction (their customers).
Increased mill levies are not the only concern posed by eliminating the mortgage registration fee. Many communities that intend to preserve notably historic properties will be in jeopardy of losing preservation funding through the Heritage Trust Fund if the new plan is activated.
While counties keep most of the revenue generated from the mortgage registration fee, 0.01 percent collected by statute goes directly into the state's Heritage Trust Fund. In 2011, this collection amounted to approximately $1.4 million, and, in 2012, yielded $1.8 million.
Losing the Heritage fee would be devastating to historical preservation in Kansas communities. The Kansas State Historical Society utilizes this allocation to endow grants for preservation of historical buildings.
Bill Meek, Topeka, is chairman of the Kansas Register of Deeds Association Legislative Committee.